Technical Analysis

EUR/USD Loses Ground After ECB Rate Hike, U.S. GDP data

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    The pair fell Thursday following the European Central Bank , followed by cautious comments from President Christine Lagarde during the . At the same time, the greenback is gaining ground thanks to solid readings.

    At the time of writing, the EUR/USD is trading at the 1.0000 area, 0.70% below its opening price, after being rejected from a high of 1.0093.

    The European Central Bank announced today its decision to hike rates by 75 basis points for the second time in a row. During the press conference, Christine Lagarde said economic activity in the euro area will likely have contracted “significantly” in the third quarter and will likely continue to do so for the rest of 2022 and 2023 due to higher prices and falling real wages.

    When asked about and forward guidance, ECB President stated that “there is still ground to cover,” but the future path and pace will be decided meeting by meeting and will remain data-dependent. Lagarde confirmed that higher rates are needed to reach their medium-term target, but she refrained from giving more insights into her estimations of the neutral rate.

    Meanwhile, the U.S. Bureau of Economic Analysis released its first estimates of the third-quarter Gross Domestic Product. Q3 GDP growth came in at 2.6%, above the 2.4% increase expected. Other data revealed that increased by 0.4% in September, below the 0.6% expected. The focus will shift to next week’s when the broad market consensus expects another 75 bps hike.

    The EUR/USD short-term bias looks neutral, according to indicators on the daily chart, from a technical standpoint. The RSI has turned south but remains above its midline, while the MACD printed a lower green bar, indicating a dwindling buying interest.

    At the same time, the price remains capped by the 100-day SMA (1.0087) and moves to test the broken channel as support at the 0.9910 area. A break below could add pressure on the euro, with the following supports seen at 0.9830, 20-day SMA, and 0.9800.

    If the EUR/USD manages to overcome the 100-day SMA, the next resistances could be found at September’s highs in the 1.0200 zone.



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